Impact of milk scare 'limited' for NZ exports

The nation's largest category of exports to China in 2012 was dairy products: milk powder, butter and cheese, with a value of $2.2 billion.

"As one of the world's biggest dairy producers, the crisis is damaging the reputation of dairy products from New Zealand, which supplies more than 80 percent of China's imported milk powder.

"Chinese consumers will shift to dairy products from other countries for the time being," said Liu Wenge, a professor at the Central University of Finance and Economics in Beijing.

However, Liu and other experts see the crisis as having just a limited, short-term impact on the country's dairy exports to China. The position of broader New Zealand products will not be shaken among Chinese consumers. 

"China will not shut the door to such a big dairy supplier in the long term," said Mei Xinyu, a senior researcher with the Ministry of Commerce.

The reality is that Chinese consumers have sought out imported dairy products because of their lack of confidence in domestic brands, as well as their regard for foreign labels.

"It will not take long for consumers, who tend to buy high-end foreign labels, to go back to New Zealand dairy products once the crisis passes," said Mei.

Further, Mei said, the contamination isn't a systemic issue for Fonterra, but just an accident at a small factory. The contamination is said to have stemmed from a dirty pipe at a Waikato factory.

"New Zealand's other industries will not be affected," said Mei.

The rebuilding of New Zealand's dairy market share in China also depends on whether the government and any company involved with the problem deals with the crisis correctly, experts said.

"At the very least, it has caused panic among Chinese consumers. Once New Zealand resolves (the issue) actively and honestly, the market will rebound in about one year," said Wang Li, an analyst at the Chinese Academy of International Trade and Economic Cooperation, a government think tank.

The New Zealand-China Free Trade Agreement was the first free trade pact that China signed with any developed country. It took force on Oct 1, 2008.